In the currency market, the dollar continued to fall against the euro. Late Wednesday, the euro was trading at $1.3264 vs. $1.3141 on Tuesday.
The two big events of the day were release of GDP figures and the FOMC meeting. The former was wretched, to say the least. The Commerce Department said inflation-adjusted, seasonally-adjusted GDP fell at a 6.1% annualized rate in the first quarter, following a 6.3% decline in 4Q08.
Taken together, that represented the worst showing in six decades. Since 1947, the economy had never contracted by more than 5% for two consecutive quarters.
However, as Marketwatch reported, “Buried in details of the U.S. GDP report, a [2.2%] rebound in consumer spending and a drop in inventories bolstered optimism that the U.S. economy was on the track to recovery after a brutal first quarter. Those bright spots, combined with surprise rise in eurozone sentiment, pushed the euro higher against the dollar.”
Meanwhile, the Fed kept its target interest rate unchanged at an ultra-low 0%-to-0.25% range, and said the U.S. economic outlook has "improved modestly.” There were no changes to plans to buy Treasurys and other securities to support the flow of credit to the economy. Thus “some of the fear of additional quantitative easing anytime soon quickly abated,” said Dan Cook of IG Markets in Chicago.
“The only major difference between [yesterday’s] statement and the previous one on March 18 is that [yesterday’s] cited the fact that most evidence points to a slowing rate of economic decline. Anyone with two eyes and a brain knows this to be the case,” wrote Josh Shapiro, of MFR, Inc.
The Blue Chip survey of economists forecasts a 2% annual pace of decline in growth in the current quarter, a small positive growth rate in the third quarter, and a stronger economy by the end of the year.